Definition of Productivity
Productivity: Definition
Productivity is the relationship between the
outputs generated from a system and the
inputs that are used to create those
outputs. Mathematically
P =
O
I
Systems Concept
inputs
Land
people
capital
facilities
equipment
tools
energy
materials
information
transformations
SYSTEM
O
I
productivity
outputs
Goods
and
services
Customers
Mathematically, How Can We
Increase Productivity?
Productivity Improvement
Productivity Improvement (PI) is the result of
managing and intervening in transformation
or work processes.
PI will occur if:
O O
I I
O O O
I
I
I
Measuring Productivity
Static:
P=O/I in a given period of time (t).
Useful for benchmarking purposes.
Dynamic:
p(1)=O(1)/I(1); p(2)=O(2)/I(2);
then p(2)/p(1) yields a dimensionless index
that reflects change in productivity between
periods. ((p(2)-p(1))/p(1))*100 yields the
percentage change between periods.
Measuring Productivity
(Continued)
Partial-Factor:
Uses a single “I” factor;
e.g., output/labor-hour, sales/employee
Multi-Factor:
Uses more than one “I”
factor; e.g. output/direct costs (labor,
materials, and overhead).
Total-Factor:
Uses all “I” factors.
(Note: Total-Factor captures “trade-offs”
between input factors.)
Measurement Problems
Multiple
Varied
products/services (aggregation-O)
categories, types, and levels of input
resources (aggregation-I)
Price/cost
changes of outputs & inputs
Redesigned
products, services, processes
“Hard-to-measure”
factors (e.g., quality)
Application of Productivity
Measures
Individual
Group
level
level
Department
Corporate
National
Global
level
level
level
level
Global-Level Productivity
Why
are global-level productivity measures
important?
How
do we compare productivity among
nations?
How
can a nation increase productivity in a
global economy?
Importance of Global-Level
Productivity Measures
Measure
and compare competitiveness
among nations.
Contribute
to the development of a nation’s
economic, social, and political policies.
Develop
Help
global cooperation among nations.
business organizations make
investment decisions.
Global-Level Productivity Measures
Organisation
for Economic Co-operation
and Development (OECD) –
/>
GDP
per capita (labor productivity * fraction
of people who work) is widely regarded as
the best measure.
A
common currency is used to measure the
GDP.
Factors Affecting Productivity
Improvement at Global Level
Education
Technology
Macroeconomic
Social
policies
and culture environments
Foreign
aids
Foreign
investments
Industry
policies & competition
Why is National Productivity
Important?
Competing on Productivity
At
the national level, growing productivity
• leads to a higher standard of living
• holds inflation in check
• enhances international competitiveness.
The
annual GDP growth is partially due to
• growth in productivity
• growth in inflation
National Productivity Measures
( /> Comparisons
within a segment of economy
over time
Comparisons
of specific productivity
measures
International
comparisons
Labor Productivity - Percent
Change from Previous Year
2001
2002
2003
1994 2003
Business
Sector
2.2
4.9
4.5
2.6
Non-Farm
Sector
2.1
5.0
4.4
2.6
Manufacturing
2.2
7.2
5.1
4.2
Other Measures Affecting
Productivity
Efficiency
Effectiveness
Quality
Quality
of Work Life
Innovation
Efficiency
Measures
the resources expected to be
consumed to the resources actually
consumed.
Hence,
it focuses on the input side of the
system. (To what degree did the system
utilize the “right” things.)
Effectiveness
Measures
what the system sets out to
accomplish (objective) with what was
actually accomplished; plan vs. actual
Hence,
effectiveness is an output measure.
(Is the output “right” - right quality, right
quantity, on time, etc.)
Quality
Degree
to which the outputs (products and
services) from the system conform to
requirements or meet customer
expectations.
The
focus is on quality attributes (e.g.,
conformance, performance, convenience,
responsiveness, perceived quality.)
Quality of Work Life (QWL)
Measures
the way that employees in a
system respond to the sociotechnical
aspects of that system.
Innovation
Measures
the applied creativity of the
system.
Relates
to the design and development of
improved products, services, and
processes.
How Do Those Other Measures
Affect Productivity?